Franco-German Spat on Role of ECB Renewed - Bloomberg
The failure of European leaders to end the debt crisis with their broadest effort yet has revived a Franco-German dispute over the European Central Bank’s role and fueled investor concerns over policy makers’ economic impotence.
As holders of Greek debt begin talks in Athens on structuring a 50 percent writeoff that was the cornerstone of a deal pieced together last month at an all-night summit, officials in Berlin and Paris swapped barbs and European borrowing costs outside of Germany rose to euro-era records.
The discord highlighted markets’ brushoff of a package that included a scaled-up rescue fund, proposed guarantees of sovereign debt and a bid to attract more international loans. The accord, which finance ministers aim to implement next month, was at least the fourth plan billed as a comprehensive strategy to end the crisis born in Greece in 2009, none of which provided a lasting fix.
“The crisis is clearly broadening,” Riccardo Barbieri, London-based chief European economist at Mizuho International Plc, told Bloomberg Radio’s Ken Prewitt yesterday. “Only Germany, and to some extent the Netherlands, are immune from the crisis at the moment.”
U.S. and European stocks fell as concern about the debt crisis outweighed a drop in American jobless claims and higher- than-forecast housing starts. The premium France pays over Germany to borrow for 10 years jumped to a record 200 basis points. Yields on bonds of countries from Portugal to Finland, the Netherlands to Austria also rose relative to Germany.